System restore has gotten better. I usually turn it off though, because in my opinion if the system is to a point where it needs to use it, you're probably much better off doing either a repair install, or a clean install.
The problem I saw a lot with it, was automatic recovery of system files after any kind of system error. I'd see computers with spyware and other crap in it, causing errors in explorer.exe, kicking in the automatic recovery routine, which more times than not put the machine in a worse situation. I don't know if that's a setting somewhere or not, or if M$ has changed it's behavior through the XP updates.